The Required Reserve Ratio

question 530

Multiple Choice

The required reserve ratio

• A) is the amount of money that banks require borrowers to reserve in their accounts.
• B) is the fraction of a bank's total deposits that is required to be held in reserves.
• C) increases when withdrawals from a bank are made.
• D) is higher for banks that make riskier loans.

---

Definitions:

Garden Gnome

Decorative figurines of mythical gnomes, typically placed in gardens or on lawns.

Coase Theorem

A concept in economics that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property.

External Benefit

A benefit derived from a product or service that affects people who are not directly involved in the transaction or production of it.

Pollution Reduction

Efforts and measures taken to decrease the amount of pollutants released into the environment.